A. Field of the Invention
The invention relates generally to a check based online payment and verification system and method, and more particularly, to a check based online payment and verification system and method for utilizing checks for paying for transactions performed on the Internet.
B. Description of the Related Art
Check authorization and check verification systems and methods are becoming more and more important, since check fraud amounts to billions of dollars lost per year by banks and retail establishments. One such check authorization system is described in U.S. Pat. No. 6,170,744, by Warren S. Lee and William Meadow, which is assigned to Payformance Corporation and which is incorporated in its entirety herein by reference. In the system and method described in U.S. Pat. No. 6,170,744, information is provided on a check by way of a bar code provided on the check, whereby that information is used to verify the check's authenticity.
Such a system requires that the bar code be placed on a portion of the check that is not reserved for other purposes.
Additionally, check based authorization and verification systems are needed for the increasing amount of transactions consummated on the Internet. Currently, the preferred method of payment is via credit card. However, use of credit cards is not particularly good for merchants, since the credit card companies typically take a 3% to 6% fee per transaction. Thus, if a customer buys a $100 item from a merchant, the merchant would only clear $94 after paying the credit card company a 6% fee ($6.00) for the customer's use of a credit card to pay for the transaction. If instead the customer paid cash or used a check, the merchant would not have to pay this overhead to the credit card companies.
Banks also prefer the use of checks instead of other modes of payment, due to their being able to make money off of the “float” of checks as the checks are processed through the Automated Clearing House (ACH) system (which may take several days to complete).
The check authentication described in U.S. Pat. No. 6,170,744 is made by physically scanning the check itself, such as by using a bar code scanner to scan the bar code on the check, in order to obtain the information from the bar code. Thus, authorization or verification of the check at a location different from the point-of-sale location, such as by a web server of a merchant accessible over the Internet, is difficult if not impossible to accomplish utilizing such a scheme.
Accordingly, it is desired to come up with a system and method for using checks as a mode of payment, for transactions performed over the Internet.